1. Human Resource Management Lecture 16 MGT 350

2. Last Lecture Factors that can Distort Appraisals – Leniency error – Halo error – Similarity error – Low appraiser motivation – Central tendency – Inflationary pressures – Inappropriate substitutes for performance – Attribution Theory – Impression management

3. Last Lecture Creating More Effective Performance Management Systems – Use Behavior-Based Measures – Combine Absolute and Relative Standards – Provide Ongoing Feedback – Use Multiple Raters – Rate Selectively – Train Appraisers International Performance Appraisal

4. Topic Establishing Rewards and Pay Plans

5. Introduction “What’s in it for me? People do what they do to satisfy some need and they look for a payoff or reward. The most obvious reward is pay, but there are many others, including: –promotions –desirable work assignments –peer recognition –work freedom

6. Introduction Fundamentals of Human Resource Management 8e, DeCenzo and Robbins

7. Types of Reward Plans Intrinsic versus Extrinsic Rewards Intrinsic rewards (personal satisfactions) come from the job itself, such as: –pride in one’s work –feelings of accomplishment –being part of a work team

8. Types of Reward Plans Intrinsic versus Extrinsic Rewards Extrinsic rewards come from a source outside the job –include rewards offered mainly by management –Money –Promotions –Benefits

9. Types of Reward Plans Financial versus Nonfinancial Rewards Financial rewards include: –wages –bonuses –profit sharing –pension plans –paid leaves –purchase discounts Nonfinancial rewards emphasize making life on the job more attractive; employees vary greatly on what types they find desirable.

10. Types of Reward Plans Performance-based versus Membership-Based Rewards Performance-based rewards are tied to specific job performance criteria. –commissions –piecework pay plans –incentive systems –group bonuses –merit pay Membership-based rewards such as cost-of- living increases, benefits, and salary increases are offered to all employees.

11. Compensation Administration The process of managing a compensation program so that the organization can attract, motivate and retain competent employees who perceive that the program is fair.

12. Compensation Administration Job evaluation – the process used to determine each job’s appropriate worth within the organization. Based on job analysis information.

13. Compensation Administration Government Influence on Compensation Administration Fair Labor Standards Act which requires –minimum wage –overtime pay –record-keeping –child labor restrictions

14. Compensation Administration Government Influence on Compensation Administration Fair Labor Standards Act –eligible for premium pay (time and one-half) –when they work more than 40 hours in a week Equal Pay Act requires that men and –women hired for the same job be paid the same.

15. Compensation Administration Government Influence on Compensation Administration Civil Rights Act: –prohibits discrimination on the basis of gender –used to support comparable worth concept Salaries should be established on the basis of skill, responsibility, effort, and working conditions.

16. Job Evaluation and the Pay Structure Job Evaluation Use of job analysis information to determine the relative value of each job in relation to all jobs within the organization. –The ranking of jobs –Labor market conditions –Collective bargaining –Individual skill differences

17. Job Evaluation and the Pay Structure Typically jobs are grouped according to type and compared within their group –clerical jobs –sales jobs –professional jobs

18. Job Evaluation and the Pay Structure Job Evaluation Methods Ordering method: –A committee places jobs in a simple rank order from highest (worth highest pay) to lowest.

19. Job Evaluation and the Pay Structure Job Evaluation Methods Classification method: –Jobs are placed in classification grades –Compare their descriptions to the classification description and benchmarked jobs –Look for a common denominator such as skills, knowledge, or responsibility

20. Job Evaluation and the Pay Structure Job Evaluation Methods Point method: –Jobs are rated and allocated points on several identifiable criteria, using clearly defined rating scales. –Jobs with similar point totals are placed in similar pay grades.

21. Point Method

22. Job Evaluation and the Pay Structure Establishing the Pay Structure Compensation surveys –Used to gather factual data on pay rates for other organizations –Information is often collected on associated employee benefits as well

23. Job Evaluation and the Pay Structure Establishing the Pay Structure Wage curves –Drawn by plotting job evaluation data (such as job points or grades) against pay rates (actual or from survey data). –Indicate whether the pay structure is logical

24. Job Evaluation and the Pay Structure Establishing the Pay Structure Wage structure –Designates pay ranges for groups of jobs which are similar in value to the organization grouped by their classifications, grades or points. –Results in a logical hierarchy of wages, consisting of ranges that overlap.

25. Wage Curve/Wage structure

26. Summary Pay Types of Reward Plans Intrinsic versus Extrinsic Rewards Intrinsic Financial versus Nonfinancial Rewards Compensation Administration The process of managing a compensation program so that the organization can attract, motivate and retain competent employees who perceive that the program is fair. Job evaluation Job Evaluation Methods – Ordering method – Classification – Point method Compensation surveys Wage Curve/Wage structure